Fineotex Chemicals: A Smart Investment Opportunity

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Fineotex Chemicals Limited (FCL), incorporated in 1979, has positioned itself as a significant player in the specialty chemicals market, catering to industries such as textiles, construction, water treatment, fertilizer, leather, and paint. This detailed analysis highlights the company's recent performance, growth prospects, and investment potential.

Explore: FINEOTEX CHEMICAL LIMITED

Overview of Fineotex Chemicals Limited

Company Profile:

  • Incorporated: 1979
  • Sector: Specialty Chemicals
  • Key Industries Served: Textiles, Construction, Water Treatment, Fertilizer, Leather, Paint

Business Expansion:

FCL is actively expanding into high-growth areas such as cleaning and hygiene chemicals, with potential collaborations with major detergent manufacturers. The company is also exploring the drilling chemicals market, which could significantly boost growth.

International Expansion:

FCL is progressing towards an international acquisition to diversify its product lines and enhance growth opportunities. This follows their successful acquisition of Biotex in Malaysia, funded by IPO proceeds.

Financial Performance

FY24 Highlights:

  • Sales: Increased from ₹5 billion in FY23 to ₹6 billion.
  • EBITDA: Improved to ₹1.5 billion from ₹1.1 billion in FY23.
  • Net Profit: Reached ₹1.2 billion, up from ₹0.9 billion in FY23.
  • EPS: Increased to ₹10.9 from ₹8.1 in FY23.

     

Margins and Returns:

  • EBITDA Margin: Improved to 26% from 22%.
  • Gross Margin: Increased to 39% from 34%.
  • ROE: Stable at 30%.
  • ROCE: Improved to 35% from 34%.

Strategic Initiatives and Growth Prospects

Sustainability Focus:

FCL is dedicated to creating sustainable chemicals, particularly in the cleaning and hygiene sectors. Their focus on eco-friendly products aligns with global trends towards sustainability.

Capacity Expansion:

  • Current Capacity: 104,000 tons with 72% utilization.
  • Planned Expansion: Adding 40,000 tons in two phases by the end of FY25.

Financial Strength:

  • Market Cap: ₹3885 crore
  • P/E Ratio: 32.1x for FY24
  • Dividend Yield: Historically highest PAT margin of 21%, with a total dividend of ₹1.65 per share.

Upcoming Developments:

  • Solar Power Plant: Commissioned a 100KW peak production capacity at the Ambernath facility.
  • Fundraising: In process for an international acquisition, with INR 120 crore confirmed for the first round.

 

Valuation and Investment Potential

  • Current Market Price (CMP): ₹362
  • Target Price: ₹477 (32% upside)
  • 52-Week High/Low: ₹459/₹266
  • Market Cap: ₹3885 crore

Valuation Metrics:

  • P/E Ratio: 24.3x for FY25E
  • P/BV Ratio: 6.5x for FY25E
  • EV/EBITDA: 269.9x for FY25E

Analyst Recommendation:

FCL's strong financial performance, strategic expansions, and sustainable focus make it a compelling investment opportunity. With a target price of ₹477, representing a 32% upside from the current levels, it remains a favourable stock for investors seeking growth in the specialty chemicals sector.

Shareholding Pattern:

Shareholders

Dec-23

Mar-24

May-24

Promoters

65.04%

65.03%

64.46%

FIIs

0.82%

1.45%

0.97%

MFs

3.69%

3.70%

3.68%

Others

30.46%

29.83%

30.90%

Financial & Valuation (INR Billion):

Y/E March

2023

2024

2025E

Sales

5

6

7

EBITDA

1.1

1.5

1.9

Adj. PAT

0.9

1.2

1.6

EPS (INR)

8.1

10.9

14.5

Valuation Metrics:

Metric

FY24

FY25E

P/E (x)

32.1

24.3

P/BV (x)

8.7

6.5

EV/EBITDA (x)

354.1

269.9

Dividend Yield (%)

-

-

Balance Sheet (INR Million):

Y/E March

FY22

FY23

FY24E

FY25E

FY26E

Net Sales

3,682

5,170

5,690

7,055

8,607

EBITDA

712

1,126

1,484

1,946

2,464

EBITDA Margin (%)

19.3

21.8

26.1

27.6

28.6

Net Profit (PAT)

569

897

1,211

1,602

2,041

EPS (INR)

5.1

8.1

10.9

14.5

18.4

EPS Growth (%)

-

57.5

35.0

32.3

27.5

BV/Share (INR)

23.7

31.5

40.4

54.3

72.2

RoE (%)

-

29.4

30.4

30.6

29.1

RoCE (%)

-

36.3

38.3

38.7

37.2

P/E (x)

68.3

43.3

32.1

24.3

19.0

EV/EBITDA (x)

737.7

466.5

354.1

269.9

213.2

EV/Sales (x)

142.7

101.6

92.4

74.5

61.0

Cashflow (INR Million):

Y/E March

FY22

FY23

FY24E

FY25E

FY26E

NP/Loss bef Tax

733

1,148

1,576

2,085

2,658

Depreciation

25

43

60

63

73

Interest & Finance

9

8

13

13

13

Direct Taxes Paid

171

264

389

484

617

CF from Operations

175

1,114

1,124

1,408

1,789

CF from Investments

(8)

(1,018)

(469)

(1,066)

(1,376)

CF from Fin. Activity

(57)

(64)

(239)

(72)

(72)

Closing Balance

275

279

570

454

515

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

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